The global ecommerce giant Amazon (AMZN, Financial) might be ruling the world’s retail segment and has proved itself to be the worst nightmare for the global retail segment. But it is not going to be an easy task for Amazon to take the lead in India just like China. In China it has to face the stiff competition from the Amazon of China – Alibaba (BABA, Financial) while in India it is stacked against Flipkart an ecommerce company less known across the world in comparison to Alibaba or Amazon.
In India despite its recent spate of failures and glitches it has recently proved that it is no underdog against the global leader Amazon, by successfully conducting its third round of funding making it a the largest Indian ecommerce company with a total valuation of $10 billion. Let us dig into the details of the fundraising and analyze its stand against the global leaders.
Flipkart not a minnow
The fundraising by the company comes even as it may reportedly be readying itself to list on the U.S. bourses and raising anywhere between $2-3 billion before going public.
Going by the reports in Times of India, Flipkart has raised $500-600 million led by its existing large investors Tiger Global, South Africa's Naspers (NPN, Financial) and Yuri Milner's DST Global, along with others.
A less known fact about Flipkart is that it has its roots in Amazon since the founders of Flipkart, Sachin and Binny Bansal, were ex-employee of Amazon. Flipkart had in July this year raised $1 billion in funding from its existing investors Tiger Global and Naspers and a small part from GIC, one of the two sovereign wealth funds of Singapore, besides contributions coming in from Accel Partners, DST Global, ICONIQ Capital, Morgan Stanley Investment Management (MS, Financial) and Sofina (SOF). After the second round of funding, the company stood at a valuation of $7 billion.
In its first round of funding Flipkart had bagged $210 million through a consortium of investors led by DST Global, Tiger Global, Naspers and ICONIQ Capital early this year. The market expects Flipkart to do the Alibaba act in India as the latter did in China and now stands at a value of $280 billion.
Flipkart’s expense sheet
Going by the managements projections most of the funds raised would be deployed by the middle of 2015 to strengthen its marketing functionalities to boost the sales of its last acquired brand Myntra and also plan for other strategic acquisitions to cement its foothold as the Indian ecommerce leader.
Flipkart claims that it had hit an annual revenue run rate of $1 billion in February this year, which means it clocked sales worth over $80 million to $90 million that month.
The company is revamping its top line management in a big way by hiring premium senior professionals from across the industry and liaising with management consultants and also adding focus to quality assurance in order to avoid repeating previous embarrassments which it faced in the last big billion day sales event. It is also looking to tie up with Cloud computing solution providers in order to efficiently handle massive rise in traffic as it eyes to hit $3 billion to $4 billion sales level in this fiscal.
Flipkart has a lot of competition to counter in its home turf coming primarily from the global leader Amazon and Snapdeal another ecommerce company of India which holds the second position after Flipkart and is close on its heels in terms of sales and popularity. Recently Amazon has pumped in $2 billion to strengthen its Indian operations and Snapdeal has been able to bag investment from Japan’s SoftBank to the tune of $800 million and has promised more. Last October Snapdeal had managed funding of $627 million primarily to boost its Diwali sales event. Flipkart has been focusing on recruitment of senior management executives from bigger, more established companies to build a strong leadership team that can fend off such breakneck competition and help it retain the position of the number one ecommerce company in the subcontinent.
Our take
Flipkart is really climbing up at a very rapid pace and it might soon repeat the maverick in the Wall Street that Alibaba did last September. Also it is an indication for Jeff Bezos that though Amazon might be the Global leaders, Flipkart is no less and currently the reigning champion in a country that houses the second largest population in the world hence it has the edge of the numbers to capitalize on. Whatever might be the equations of competition the point to note is that it might soon go for listing itself in the U.S. and in case it comes up with an IPO in the recent future it can even dwarf the Alibaba IPO. As investors it would be good to keep an eye on the moves of this Indian conglomerate so that we are prepared to take advantage of its IPO when and if it comes up in the near future.
